Gm Saturn Case Study

GM Saturn Case Study

Ron Rubinstein

Strategic Marketing Management course

NYU SCPS - Fall 2005

Key Issues

 How (whether) to revive a faltering brand after impressive initial success in early 90s.

 How to regain competitive advantage after loss of momentum, and failure of initial business strategies to sustain long-term sales growth.

 How to penetrate wider demographics (younger, male)

 How (whether) to penetrate foreign market

Key findings: Environmental/General

 Saturn developed by GM as a separate brand and independent subsidiary in the late '80s, to deal with shrinking domestic market share for passenger cars:

* from 44% to 33% between '85 and '90

* 42% of buyers didn't even consider buying GM

* Main competition were compact Japanese cars, due to perceived higher quality and value.

 Factory was established in Spring Hill, TN, to isolate from Detroit mentality

 Key strategy to ensure quality: maintain good labor/management relations through

cooperation with UAW in all aspects of business.

Key findings: Product Strategy

 Initial concept: Compact, high-quality cars:

* SC1, SC2 coupes

* SL1, SL2 sedans

 Technology innovation, e.g. plastic bodies

 Target Market:

* Demographics: baby boomers, college educated, 25-49

* Sell 80% to "Converts" (wouldn't otherwise buy GM)

 Larger vehicles were added later:

* SW1, SW2 station wagons (1993)

* L-Series mid-size sedan and station-wagon (1999)

* VUE SUV (2001)

Key findings: Promotion Strategy

 Unique, "folksy", "straight-talk", $100M+ consumer ad campaign, building a focused brand image, using themes such as:

* Saturn employees' enthusiasm, and dedication to building cars "in a brand new way" with US can-do spirit.

* Saturn buyers' lifestyles, playing up baby boomer themes of utility, value and safety.

 Brand focus strengthened by using model numbers (not names), and calling dealerships "Saturn of [location]"

 No haggle, stress free, high-integrity selling at dealerships

Key findings: Pricing & Placement Strategy

 Dealership strategy: Large territories (to prevent internal competition), e.g. one dealership per metro.

 Traditional import-car markets (East, West coast), not to cannibalize stronger GM heartland markets. Dealers chosen with import-brand expertise.

 Pricing:

* One price - no rebates or promotions. Facilitates option of calculating total package pricing and finance costs from the ease of one's home on website.

* Affordable pricing with high value

Key findings: Successes and Failures

 Initial success very high:

* 170Kunits sold in '92: 170% more than '91, and representing 2.1% share of domestic market.

* Cult-like following that drove sales growth until '96.

 Failures:

* Employment model did not scale well to increased production. Increase attempts harmed quality and employee relations.

* Failure to reach 300Kunit/yr sales goal. Sales declined from peak in '95 of 285Kunits.

* Electrical vehicle launch (in line with innovative image) was a flop

* Very late launch of SUV line in